An Improved Method for Estimating Utility

Recently, we (Judiesch, Schmidt, & Mount, 1992) concluded that the Schmidt et al. (1979) SDy estimation procedure results in downwardly biased estimates of utility. This conclusion led us to propose a modification of the Schmidt et al. method that involves estimating SDy as the product of estimates of the coefficient of variation (SDy/ Y) and an objective estimate of the average value of employee output (Y). The present article reviews the rationale underlying our conclusion that this modification of the Schmidt et al. method of estimating SDy results in more accurate estimates of SDy, and hence, utility.